India sign free trade agreement with EFTA, PM Modi terms pact as 'watershed moment'

In a significant development for India's trade landscape, the nation has officially signed a free trade agreement (FTA) with the European Free Trade Association (EFTA) on Sunday. The agreement, seen as a crucial milestone in India's ongoing trade negotiations, opens up new avenues for collaboration.

The EFTA, comprising Iceland, Liechtenstein, Norway and Switzerland has extended duty-free market access for a range of Indian exports including animal products, fish, processed food and vegetable oils. Mint reports that the EFTA nations have also proposed a substantial $100 billion investment in India over 15 years, with the potential to generate approximately a million jobs. These negotiations between India and EFTA began in 2008.

FTA negotiations with Oman and the UK are reportedly in their final stages, adding further momentum to India's trade engagements on the global stage.

The contours of the deal, signed at Bharat Mandapam, entail immediate duty-free access, positioning it as the most favorable offer among India's current FTA partners. Additionally, the EFTA nations plan to establish offices in India to facilitate their companies in navigating the Indian market.

Despite the positive developments, some trade experts express reservations about the potential impact on India's trade balance. Notably, 98% of India's exports to Switzerland fall under the category of industrial goods, entering at zero tariffs.

Ajay Srivastava, head of the Global Trade Research Initiative (GTRI), a trade think tank suggests that India's agricultural exports might not see a significant increase due to stringent quality standards and non-tariff barriers. The trade deficit with EFTA, particularly with Switzerland, is a point of concern for India. In the fiscal year 2023, India's imports from EFTA exceeded exports, resulting in a trade deficit of $14.8 billion.

In the financial year 2024 (April 2023-January 2024), India's exports to EFTA countries amounted to $1.87 billion, covering items such as chemicals, pharmaceuticals, apparel, pearls, and precious and semi-precious stones. In contrast, India imported goods worth $20.45 billion from EFTA countries in 2023, including pearls, precious or semi-precious stones, precious metals, and coins valued at $16.7 billion.

The FTA with EFTA signifies a step forward in India's global trade strategy, bringing both opportunities and challenges. As India continues to navigate international trade relations, the impact of this agreement on the broader economy remains a subject of keen observation.